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  • Agricultural commodity provider, Ag Growth (TSX:AFN) has reported a 14 per cent earnings drop in Q4 2019
  • The drop was the result of a poor US grain season and further spending in the company’s AGI SureTrack platform
  • Furthermore, Q1 2020 is expected to underperform due to the ongoing impacts of COVID-19
  • The company has already been forced to close its plants in Italy, India, France and Brazil, as a result of the pandemic
  • At market close, Ag Growth International Inc (AFN) remained steady, with shares trading for C$17.29 and a market cap of $322.99 million

Agricultural commodity provider, Ag Growth (TSX:AFN) has reported an earnings drop in Q4 2019, even before the impact of COVID-19 began to take hold.

In their fourth quarter and full-year results, the company saw around a 14 per cent reduction in earning, when compared to 2018’s corresponding period.

These losses translated to the full-year figures as well, which are also down around $4 million to approximately $144 million.

Ag’s earnings were negatively impacted by two separate factors. 

Firstly, the company increased its investment in the AGI SureTrack platform. SureTrack is a subscription-based farm management system. The company invested a further $2.7 million in the service to boost sales and technical resources.

Secondly, a wet season in the US, followed by a late harvest, impacted the company’s grain storage business. The company conceded that grain storage is already in performing weakly. It seems these contributing factors haven’t helped.

Furthermore, the company stated that deferred projects, which were initially planned for Q4 2019, have pushed earnings into early 2020.

Although the company reported a net loss in Q4, this figure was still an improvement on the previous corresponding period.

Due to similar macro-environmental issues, the company reported a Q4 net loss of $11.9 million in 2018. However, this year’s loss is around $8.2 million, suggesting some improvement.

Things are likely to get worse for the company this quarter. Ag Growth has already conceded that COVID-19 will have a significant negative impact on the company’s business. These impacts include supply chain issues, and government mandated shutdowns.

As previously announced, the company has been forced to close its plants in Italy, India, France and Brazil. Further shutdowns in the US are also a possibility. 

Despite this news, Tim Close, President and CEO of Ag Growth, is hopeful that demand for its services will remain steady.

“AGI’s products, services and technologies have been declared an essential service in multiple states and provinces; recognition of the critical nature of the global food infrastructure that we supply.

“The COVID-19 crisis will have an impact on our business in 2020, however we are working to mitigate the impact and prepare for the post COVID-19 world,” he said.

At market close, Ag Growth International Inc (AFN) remained steady, with shares trading for $17.29. 

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